Central Bank of Ireland Boosts Forecasts on GDP Growth

By William Murphy from Dublin, Ireland via Wikimedia Commons

On Thursday, the central bank of Ireland boosts its forecast for economic growth amidst the strengthening of domestic activity and the improvement of international demand. However, it said that the economy was vulnerable to trade restrictions that will be imposed post-Brexit and changes in the tax rules of the European Union.

The economy of Ireland has been the best performing in Europe ever since 2014 and the central bank notices that momentum is continuing, with the gross domestic product set to improve by 4.8 percent in 2018 – up from a forecast that was released earlier of 4.4 percent and by approximately 4.2 percent next year.

That places the forecasts of the bank further ahead of the finance ministry, whose figures determine the basis of the budget policies of the government. Last October, the said ministry predicted that the GDP would improve by 3.5 percent this year and 3.2 percent in the coming year.

In a statement, director of economics and statistics of the bank, Mark Cassidy, said: “Our forecasts for further growth in earnings this year and next, combined with expectations of modest inflation, means rising wages should translate into higher real incomes and greater purchasing power for households.”

Risks to the growth of the Irish economy, where technology and pharmaceutical firms from the United States are considered to be major employers, include the uncertainty regarding the implications of the tax reform of the United States and the possible changes of the European Union to the taxation of digital services.

It said that the potential risk of measures regarding protectionist international trading is also considered to be a danger.

The said report also warned that there could be a costly diversion of resources to logistics and trade-processing systems if the regime that is substantially governing trade shifts of the UK-EU.

The volatility of the GDP of Ireland has called into doubt its relevance in accurately measuring activity. However, the bank cited strong employment as an indication that the real economy of the country was performing well.

Unemployment is set to fall to below 5 percent next year from 6.1 percent in March, which is down from the 16 percent in 2012 when Ireland was midway through a three-year international bailout.